Most home owners are choosing their home loan for reasons other than price due to a lack of experience in the market and often stumble into expensive ill considered options.
Thanks to their lack of experience, many first homebuyers make serious decisions based on one or two factors that should be taken into consideration only alongside a wide range of others.
When home loans are discussed, interest rates are often given more weight than is sensible. Friends and family have strong opinions on the best lender and loan, with their prior experience often seen as expertise. Too often, a potential borrower doesn’t shop around, believing there is little difference between lenders, loan product suites and/or that one lender is much more secure than another.
According to Mortgage Choice’s Recent First Homeowners Survey, only 22 percent of Australians base their choice of lender on the fact that it was ‘the cheapest all-round’. This means 78 percent did not. How much money do these borrowers waste by not looking at all the facts and figures?
Mortgage Choice spokesperson Kristy Sheppard said, “A home loan’s interest rate is important but a potential borrower shouldn’t look at that aspect alone before choosing a lender and loan product. Upfront, regular and switching fees should also be carefully considered as should features such as offset accounts and redraw facilities. Service quality is another element.”
“Nor should a borrower base their decision solely on the fact that they do everyday banking with a lender, although this may mean they are able to contribute less of a deposit to a property purchase. The many aspects of a home loan and the term of commitment make it a vastly more complex product when compared to an everyday banking facility, hence the same lender may not be appropriate for both.
“Although it is tempting to make life changing decisions based on the opinion of people closest to us, taking out a home loan is a very important financial commitment that often has ramifications if executed incorrectly. Take the time to choose wisely!”
